Legacy Education Inc. Q3 FY2026 earnings call

Core Business Context

• The company operates in the U.S. healthcare education sector, which faces sustained structural workforce shortages across nursing, imaging, surgical technology, and other medical support roles driven by demographic shifts and rising care demand. Healthcare roles remain dependent on skilled in-person workers, supporting durable demand for Legacy's training programs.

Operational Execution & Program Expansion

• Added new surgical tech cohorts across three campuses, generating 26 new enrollments, and added sterile processing programs across three campuses, generating 49 new enrollments. Full class filling was delayed by extended state approval timelines that shortened the marketing window for the quarter.
• Preparing for cardiac sonography and MRI program expansion at the CCC Salinas campus in Q4 fiscal 2026.
• Expanded physical facility capacity: added 6,000 square feet at the Lancaster campus, and secured 53,000 square feet of new space at the Temecula campus for phased occupancy through January 2028 to support future enrollment growth.
• Signed a letter of intent for the company's first new branch location outside of California, and is finalizing required regulatory applications for approval.

Academic Quality & Compliance

• Improved overall student retention and reduced attrition in the quarter, building on Legacy's already strong retention profile.
• Received maximum 6-year reaccreditation for Integrity College of Health (Pasadena) and 5-year reaccreditation for Contra Costa Medical Career College; all accreditations and Title IV participation remain fully intact.
• The company maintains a compliance-first mindset that aligns with evolving, higher regulatory standards for the career education sector.

Financial Performance & Scaling

• Demonstrated meaningful operating leverage: educational services expenses as a percentage of revenue improved 270 basis points YoY in Q3, confirming the core academic delivery model scales profitably as revenue grows. The company continues investing in faculty, labs, and academic quality while capturing efficiencies.
• Ended the quarter with a strong balance sheet: $21.7 million in cash and equivalents, $49.5 million in stockholders' equity, and only $600,000 in outstanding debt. Positive operating cash flow of $2.9 million was recorded for the quarter.
• The company evaluates selective acquisition opportunities focused on adding aligned healthcare programs/institutions where Legacy can improve execution and outcomes to create long-term value, rather than simply purchasing incremental revenue.

Legacy Education operates as a single consolidated segment focused on healthcare workforce education. For the third quarter ended March 31, 2026:

• Total revenue: $21.4 million, up 15% year-over-year (YoY)
• EBITDA: $4.1 million, up 8% YoY
• Adjusted EBITDA: $4.4 million, up 12.6% YoY (20.6% adjusted EBITDA margin)
• Net income: $3 million, up 7.5% YoY
• Diluted EPS: 22 cents, up 4.8% YoY
• Educational services expense: $11 million (51.7% of revenue, down 270 bps YoY)
• General & administrative expense: $6.2 million (28.8% of revenue, up 390 bps YoY)

For the first nine months of fiscal 2026:

• Total revenue: $60 million, up 29.7% YoY
• EBITDA: $9.6 million, up 16.1% YoY
• Adjusted EBITDA: $10.5 million, up 22.3% YoY
• Net income: $7.3 million, up 15.1% YoY
• Diluted EPS: 52 cents, up 1 cent YoY
• Educational services expense: $31.7 million (52.8% of revenue, down 90 bps YoY)
• General & administrative expense: $18.4 million (30.7% of revenue, up 270 bps YoY)

Management did not issue specific quantitative guidance for full-year fiscal 2026, but provided qualitative forward-looking outlooks:

• The company is entering a new phase of scalable growth, converting its existing foundation of campus scale, program breadth, compliance infrastructure, and acquisition integration experience into expanded enrollment and revenue through organic growth, new programs, branch expansion, and selective M&A.
• Organic enrollment ramp for the recently approved surgical tech and sterile processing programs will continue through Q4 fiscal 2026, with excess capacity available to accommodate additional student enrollments after the delayed approval timeline shortened Q3 marketing.
• Capacity expansion at the Lancaster and Temecula campuses is expected to support enrollment growth from the current ~800 students per campus to 1,000-1,500 students per campus over the next 12-24 months.
• The new out-of-state branch, if approved, will initially offer ~17 programs at launch (with nursing requiring additional regulatory approval for a phased ramp), and has capacity to grow to 600-800 students within a few years, with room for additional physical expansion at the selected site if needed.

• Forward-looking statements regarding future growth, regulatory approvals, and enrollment are subject to inherent uncertainties, many of which are outside of the company's control, that could cause actual results to differ materially from current expectations. Key risks are outlined in the company's SEC filings on Form 10-K and Form 10-Q.
• Organic branch expansion and new program launches are dependent on securing required state and federal regulatory approvals, which can take longer than anticipated and may not be granted.
• The career education regulatory environment is evolving, with rising standards that could impose additional compliance costs or operating requirements.
• Future enrollment growth depends on sustained student demand for healthcare training programs and continued employer need for new skilled healthcare workers, though management notes current demand is strong.

Q: Can you provide details on organic branch expansion plans and acquisition pipeline, including whether expansion will remain in California or move outside the state? / A: Management confirmed the next new organic branch is located outside of California, and is progressing through required regulatory approvals. The company is currently deep in due diligence for several selective acquisition opportunities that complement its existing healthcare education platform, and management is optimistic these will move forward. The company's expansion strategy prioritizes markets with strong unmet workforce demand for its programs.

Q: What is the current status of student demand funnel, employer demand for graduates, and student placement outcomes? / A: All of Legacy's programs, particularly newer offerings like surgical tech, sterile processing, and cardiac sonography, face strong unmet demand because few other institutions offer these programs in the markets Legacy serves. Student placement outcomes are strong across all program categories, and employers actively partner with Legacy to accept students for clinical externships and hire graduates upon completion.

Q: Can you outline the enrollment ramp timeline and total capacity for the campus expansions in Lancaster and Temecula, and the new out-of-state branch? / A: Lancaster currently has ~800 students and added 6,000 square feet that is already occupied by expanded imaging programs. Temecula currently has ~800 students and will phase in 53,000 square feet of new space by 2028. Combined expansion will grow capacity at both campuses to 1,000-1,500 additional students over the next 12-24 months. The new out-of-state branch will have ~25,000 square feet at launch, support up to 600-800 students over a few years, and has room for further expansion on-site. Nursing programs at the new branch will require separate regulatory approval and ramp over a longer timeline, while 17 other programs will be available at launch.

Q: Will the recently launched surgical tech and sterile processing programs continue ramping enrollment in the June (Q4) quarter, and is there remaining capacity to grow? / A: Extended state approval timelines shortened the marketing window for Q3, leaving significant unused capacity for these programs. State approvals are now secured, and enrollment will continue ramping in Q4. Legacy already has hired required faculty and has physical capacity in place to accommodate additional enrollments as lead flow builds.